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Dr. Blu Putnam, chief economist and managing director of the CME Group, the world’s largest operator of futures and options exchanges, was the guest speaker at The Chicago Farmers’ March 9, 2020, meeting. He provided his perspectives on the “Current Economic Environment with Insights from the CME Market Sentiment Meter.”

The presentation opened with a discussion around the timing of when different markets reacted to the spread of the COVID-19 virus. Dr. Putnam noted that oil markets were quick to react with price declines, since the virus was first discovered in China, because China is a huge importer of oil. By contrast, downward pressure on U.S. and European equity indices were several weeks behind. This appeared to reflect that global equities waited until the narrative changed from a China-only story to a global narrative with news about tracking the spread of the virus around the world.

The reaction of equities to policy responses also was intriguing. Dr. Putnam noted that when the U.S. Federal Reserve (Fed) announced an emergency cut in rates on March 3, 2020, equities reacted with further declines. While the Fed was acting in an accommodative manner, which under other circumstances might have been reflected in an equity rally, market participants chose to focus on the forward-guidance, namely that the Fed was extremely worried about how the economy would handle the spread of COVID-19.

Dr. Putnam shared some new research from CME Group on ways to quantitatively track changes in market sentiment. In an example from the past year, Dr. Putnam shared that the Market Sentiment Meter showed that back in May 2019, equities were in a highly conflicted sentiment state. At the time, market participants were weighing the pros and cons of the U.S. tariff tensions with China, with some market participants seeing optimism while others were very worried about a global slowdown in trade and growth. By December 2019, equity markets had become comfortable that a reasonable resolution of the tariff tensions was at hand with a Phase One U.S.-China trade deal, and the sentiment risk distribution returned to a typical balanced-risk shape.

In closing, Dr. Putnam focused on agriculture and talked about how market sentiment had evolved during the planting season in 2019. Early in the season, sentiment and risks seemed relatively balanced. By May 2019, however, sentiment and risks had shifted into a much more anxious state, due to a cold spring and the considerable flooding that was delaying plantings. Dr. Putnam noted that as of March 2020, the corn market had returned to an anxious sentiment state. Corn market participants had a lot about which to be concerned with oil prices dropping and impacting ethanol, with the virus lockdowns closing restaurants and impacting beef (steak) sales, and with jobs being lost in many sectors of the economy shrinking incomes and demand.

Dan Wagner, senior vice president, government relations, of the Inland Real Estate Group, LLC, was among the speakers at The Chicago Farmers inaugural webinar that was held on April 20th in lieu of a regular meeting due to the restrictions on large gatherings. He was joined by Nate Kuhn, financial adviser with Chicagoland 1031 Exchange. Inland is a Platinum Sponsor of The Chicago Farmers.

Dan gave an overview of Inland, which was founded 52 years ago by four Chicago public school teachers who became involved in real estate ventures and formed Inland. Over the years, Inland has purchased $47 billion in commercial real estate. With its experience in real estate, Inland developed the Delaware Statutory Trust (DST) structure that is used in Section 1031 exchanges. Inland Private Capital Corporation’s counsel worked with the Internal Revenue Service to educate them on the DST structure and Revenue Ruling 2004-86 was issued as a result of the collaboration. Section 1031 of the Internal Revenue Code can provide a strategy for deferring capital gains tax that may arise from the sale of a business or investment real property.

Nate said that Inland is one of the sponsors of DSTs that his firm works with. Chicagoland 1031 Exchange is independent from Inland. He said that DSTs could be a consideration at retirement or at other points in people’s lives when they may be thinking about changing their investments into something that is passive.

A Section 1031 exchange allows people to sell property and defer the ensuing taxes by purchasing another property with the proceeds of the sale, said Nate. Additionally, the DST structure allows the investor to continue to exchange real properties until the investor’s death. Upon the death of the investor, the heirs may receive a step-up in basis to avoid completely the deferred capital gains tax.

“With the DST, an investor has the ability to be a fractional owner of property that he would not be able to afford on his own, for instance a $100 million apartment complex,” said Nate. “The DST allows the investor to get the advantage of a potential cash flow-generally around 4.5 percent to 6.5 percent without the responsibilities that come with the ownership of property,” said Nate. Because this is a real estate investment, the investor could also realize appreciation when the DST is sold. At the same time, the DST owner also participates in the downside if a property sells for less than its original purchase price; additionally, cash flows can fluctuate and are not guaranteed.

The fractional ownership also allows for diversification across different asset styles and geographically, added Nate. A person could go into three or four DSTs that are involved in asset classes other than multi-family dwellings, such as self-storage facilities or medical care. Dan added that the DST owner also is not responsible for loans on the properties.

Nate also pointed out that the like-kind involved in the exchanges does not mean that an investor has to buy the same kind of property he or she sold; it just has to be an investment property.

The men noted the minimum investment in a DST is $100,000, but if an investor has less than that to invest, there is some leniency. But the exchanges do tend to be large, in excess of $1 million, Nate said.

Nate pointed out that with a DST, the investor gives up control to the sponsor of the DST. Additionally, DSTs are not liquid investments, but the investor should receive cash flow and potentially appreciation throughout its duration. The DST could sell within three to five years, but it is usually seven years. To invest in a DST a person must qualify as an accredited investor. An accredited investor must have a net worth over $1 million, alone or together with spouse (excluding the value of primary residences, or $200,000 of income individually ($300,000 with a spouse) in each of the prior two years with reasonable expectation to continue for the current year. .

Nate said that DSTs can be purchased in living trusts or irrevocable trusts. He has also worked with LLCs and corporations (irrevocable trusts and other entities have different accreditation standards that he is happy to discuss). Nate suggested that DSTs are good measuring sticks for people who are considering buying property directly. “Compare the property to a DST and determine if it is better than a DST,” he said. Nate went on to say that he has worked with quite a few farmers who decided to exchange into a DST.

Dan commented, “Inland is the number one sponsor of DSTs. It’s a dynamic concept. People should consider working with a knowledgeable financial adviser such as Nate to learn if it works for them.”

You can read more information about 1031 exchanges and DSTs at Chicagoland1031exchange.com. Nathan Kuhn can be reached at 847-607-4976, ext. 1, [email protected]

(The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last two years, and reasonably expects the same for the current year) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investor’s situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.

This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Nathan Kuhn at 224-427-3421.

There currently is a keen interest in the growing of hemp, even though growing the plant just became legal one year ago. Dr. Winthrop B. Phippen, professor of Plant Breeding and Genetics, School of Agriculture, Western Illinois University, discussed this new crop during the Chicago Farmers February 10 luncheon meeting.

“The current hemp industry is new and there is a lot of uncertainty that surrounds hemp production,” said Dr. Phippen “Because it was just legalized a year ago, there is little research and information on it. It is apparent from the 2019 growing season that producers are determined to grow hemp, but they need to create networks.”

Dr. Phippen pointed out that hemp was grown in Illinois during World War II for its fiber, the plant’s most valuable product. Hemp is useful for its fiber, grain, and CBD (cannabidiol) oil. Hemp’s oil and seeds are the major interests today. In 2019, there were 970 applications in Illinois; 294 processor applications and 644 grower licenses, according to Dr. Phippen.

Hemp, like marijuana, is a cannabid plant, but the flower from the marijuana plant is significantly higher in THC, the chemical responsible for most of marijuana's psychological effects, than it is in the hemp flower, Dr. Phippen noted. Hemp is used for the extraction of its CBD (cannabidiol) oils.

“We do not have data from hemp’s 2019 growing season,” said Dr. Phippen. “There were no research trials and growers are trying to develop a supply chain. What is being grown now is not the same as the hemp that was grown more than 70 years ago for its fiber.”

He said that growing hemp is more labor intensive than producers originally had expected. Industrial hemp that is grown for its CBD is harvested by hand. The plants are hung to dry in drying sheds or warehouses. The grain of industrial hemp is harvested with a combine. Following the harvest, the hemp must be stored immediately in aeration bins. Industrial hemp fiber is harvested by mower and baler and the bales are stored at 15 percent moisture. Proper storage both seeds and oil are critical to prevent spoilage.

The professor noted that growers do face challenges:

markets or end users are not identified prior to planting

protocols are needed for the final products

limited availability of seasonal labor

experienced workers are not available at planting or harvesting

no registered chemicals

there is no infrastructure in the state for processing.

Dr. Phippen said there are a lot of uncertainties in the production and processing of the plant, and it is an expensive endeavor. “People have to do their due diligence regarding their budgets,” he said. “We have to wait and see what happens when regulations are in place.”

”In the midst of the coronavirus, no one knows where the overall world economics are going, let alone where agriculture’s economics are headed during this uncertain time, but we do know there will be a lot of change,” Randy Dickhut, Farmers National Company senior vice president of real estate and guest speaker, said during an April 20 webinar that took the place of Chicago Farmers usual meeting setting due to the coronavirus and the large group restrictions that are in place. Farmers National, a gold Sponsor of the Chicago Farmers, manages $9.2 million worth of land and is one of the country’s largest independent oil and gas leasing firms.

Randy explored what owning land was like before the coronavirus, what it is like in early 2020, and what will be the new normal.

Land is important to agriculture and it is growing in importance, said Randy. It comprises 83 percent of the total assets in agriculture, making it almost 100 percent of the equity in agriculture. He noted that the stability of agriculture rests in its land values.

Referring to land values in Nebraska, Iowa, and North and South Dakota, Randy said that land values have had “quite a ride” since the early 2000s. He said that land values are increasing due, in part, to the fact that the Corn Belt is expanding north and that has added value. The peak of the land values hit in 2013, but the values have not fallen much for average land.

Giving examples of land values, Randy related that values in Illinois had increased to more than $7,000 per acre for average land in 2019. In Kansas, the valuation was $2,000 an acre, but the numbers were inching up. Land values in Arkansas were at $3,500 an acre and they had not plateaued. “Values in Arkansas were moving upward because the Arkansas delta region has a number of crop options that include corn, soybeans, rice, and cotton,” he said. “The area also attracts a lot of institutional investors because of the size of the tracts and land prices are low.”

Randy went on to say that farmland is a good long-term investment and compares favorably with other real estate investments: it offers consistency, the land is always rented; there is no vacancy.

He noted that farmland correlates to 10 year Treasuries. It is also a hedge against inflation. While farmland ownership compares somewhat to the movement of gold, it is more or less counter cyclical to the stock market, so it is a good investment for spreading out assets.

Land values were in positive territory in the early 2000s, but they are not as good today, observed Randy. At the opening of 2020, farmers had a little bit of optimism: grain prices were getting slightly better as well as livestock and dairy prices. Additionally, the United States was in Phase I of the China trade deal and the third payment of MFP had been made.

Randy added, “But, the best laid plans go astray.” He did note, however, that land values are holding due to low interest rates. Randy said there also is not much debt in agriculture now. The issue is the lack of availability of working capital. If grain values would increase, the future would look brighter.

In the long-term, there are a number of converging trends that will have effects on agriculture and land values, Randy said. He noted the internet and artificial intelligence, ongoing generational land transfers, food preferences and changing eating habits, and changes in food production. “Things change quickly and land values change quickly too,” said Randy.

He said the “new normal” will be affected by three trends:

Sustainability in resources and food and secure sources

Traceability, where our food is coming from

Changes in land ownership through technology and purchases by institutions

Randy observed that climate change and land usage also will impact land values; however, the Midwest continues to be a prime spot for investment. Experts are studying how much useable land the country has. He said that one-half of the land goes to agriculture for pasture and feed grain. “Will that remain to be the case as we move forward?” Randy asked.

Among the challenges that agriculture will face:

population loss in rural areas

migration from urban areas to rural areas, which could cause changes in ownership of land

technology is increasing yield and less land is being used with better crop production

the effect of growth in electric cars on fuel and corn

lab grown food

population growth or leveling off of population

Covid 19’s drastic effects on grain and livestock prices

In response to a question about lenders from a webinar listener, Randy said that March and April brought crashes in ethanol and livestock prices, which will pose real challenges to lenders for equipment purchases and other purchases. “I am sure lenders are making plans now on how they will mitigate those losses,” responded Randy.

Responding to another question, Randy said that the best times to sell farmland are late summer and early fall. “We usually see a lot of activity post-harvest,” he said. The next best time is mid-January to February; however, “farmland will sell at auction year-round.”

How well a non-operating landowner communicates with the renting farmer will go a long way in ensuring a well-informed landowner and a successful farming operation. This was the underlying theme of the “landowner boot camp” conducted by Jennifer Filipiak and Jami Cox at the January 13th Chicago Farmers meeting.

Ms. Filipiak, executive director of Driftless Area Land Conservancy, and Jami Cox, of AgAware, are members of TCF’s board of directors. Ms. Filipiak and Ms. Cox explained that they drew information from the USDA Agricultural Census and a survey of non-operating (non-farming) landowners conducted by American Farmland Trust (AFT). (The link to the AFT survey is www.farmland.org/noissurvey. The link to the USDA ag census is https://www.nass.usda.gov/AgCensus/)

The USDA Agricultural Census indicates that 39 percent of U.S. farmland is rented, and in the Midwest, rental rates are higher. In Illinois, 60 percent of farmland is rented. Nationally, 61 percent of land is owned by the person who is farming it; 31 percent of American farmland is owned by non-operators who rent the land to farmers, and eight percent of farmland is owned by farmers who rent the land to other farmers. Ms. Filipiak noted that an operator refers to either a farmer or rancher, while a non-operator owns the farmland, but doesn’t farm it. Through a survey of non-operating landowners in 11 states, AFT found that most of these landowners live near their land. They may own the land for a number of different reasons, including investment, recreational, or family (inheritance) purposes. The AFT survey also showed that most landowners trust the farmers who rent their land to make good decisions about its management and are committed to their renters continuation as a renter of their land.

Ms. Filipiak pointed out that farmers who rent land to farm often rent from multiple landowners. “The surveys also indicate that 57 percent of the rented acres are rented annually,” said Ms. Filipiak.

A survey of Illinois, Iowa, and Indiana for agricultural landowners, found that 63 percent of these landowners have experience in farming, but they might not have the confidence in making decisions because farming has changed in recent years.

Ms. Cox pointed out that verbal leases are common in many parts of the country. Ms. Filipiak noted, “In many areas we found that a written lease sends the message ‘you don’t trust me.’”

Regarding leases, while they usually renew annually, many are long-term, and can be three to five years in length, with some as long as 15 years, said Ms. Filipiak.

Ms. Filipiak and Ms. Cox stressed that the landowner’s trust in the farmer is an important factor in the non-operator landowner-renter relationship. In a survey, landowners indicated that other factors that rate high in determining a renter are:

The renter is trustworthy

The renter cares about the landowner’s land

The renter is financially responsible

Non-operating landowners indicated that they wanted more information on their land’s soil and water quality. They want to be well-informed. The AFT survey indicated that 92 percent of Illinois landowners also said they trusted their operator to initiate good conservation practices. Noted Ms. Cox, “The landowner will likely support the renter in conservation practices they wish to implement.”

“The survey found that the non-operating landowner loves the land and wants the renter to love it as well,” said Ms. Cox. “The landowner is willing to structure a lease to accommodate a renter’s input. It is important that the landowner and the renter have a conversation that will inform the lease.”

Ms. Cox and Ms. Filipiak pointed out that landowners can self-educate and learn about their land and farming operations by doing such things as riding in the combine with the farmer to personally see the land and, at the same time, talk with the farmer.

The women said that landowners should create goals for their land, ask the renter what their goals are, and determine how the two parties can work together to achieve all of the goals.

Issues that the renter and landowner must agree on include:

The length of the lease

Is the landowner crop sharing or will it be cash rent

What is permitted and what is prohibited on the land, e.g., could hemp be grown on the farm; can the renter tile the land; etc.

Communication is very important in the relationship. “The landowner and renter have to start the conversation and determine what each one needs,” said Ms. Filipiak. Ms. Cox noted, “The Midwest has productive land and the farmer does not want to ruin the land. Each of the parties has something the other needs – landowners need a farmer, and farmers need land to farm.”

Ms. Filipiak pointed out, “A lot of the non-operators are not getting the information that the famer is getting. We need to get that information out in more general ways and not just place it in resources that only a farmer would access. We need to market to a broader audience.”

Colleen Callahan has a mission. As director of the Illinois Department of Natural Resources (IDNR), she is striving to make Illinois residents more aware of what the IDNR does for them and making IDNR more aware of what the state’s residents want from it.

Ms. Callahan, a past president of The Chicago Farmers, was the guest speaker at TCF’s holiday meeting on December 9th at the Union League Club. During her presentation she outlined IDNR’s responsibilities and sought input from the audience members regarding how they would like to see the IDNR involved in their lives.

“Many people think the IDNR deals with deer, duck, and fish, but the department is so much more than that,” said Ms. Callahan. “For example, here we are in Chicago with Lake Michigan at its doorstep. Were you aware that the IDNR is responsible for the coastline along the shores of Lake Michigan? It comes under the auspices of the department’s Coastline Management office, which also is responsible for the release of Lake Michigan’s water to 7 million people. As a department, we do ourselves a disservice by not being more engaged in the Chicago area.”

Ms. Callahan noted that the management of the state’s recreational sites are IDNR responsibilities. This includes the 329 state owned parks, which attract 39 million visitors a year, community parks, and the 1,600-acre world class shooting complex in Sparta, Illinois. “International visitors participate in shooting competitions at the complex and they are thrilled to be there,” said Ms. Callahan.

She said that the IDNR has more than $1 million in grants to share with communities to improve their park sites. She introduced Ted Penesis, director of community outreach, who is working to further community relations and advise the communities how the grants would be best used. Recognizing that students from the Chicago High School for Agricultural Studies were in attendance, Ms. Callahan said that speaking at TCF’s meeting was an ideal occasion to share with them IDNR job possibilities such as water engineer or wildlife biologist. “When it is time to consider a career path, I hope you consider IDNR,” she added.

Ms. Callahan observed that cultural resources could also be a part of IDNR’s title because it is responsible for the state’s historic sites and museums. In response to a question from the audience, Ms. Callahan related that the new state museum director is a champion for presenting our state historic sites, some of which were closed during the state’s lengthy budget impasse.

“There are areas in some of our parks that have been closed and sections of the Illinois and Michigan Canal that are in need of repair,” she said in a response to an audience member’s concerns. “These are state treasures, with $1 billion of deferred maintenance statewide. However, now we have a budget, a capital bill, and we are hiring people so that we can address this list. There are things that you will notice that are being done, but it will take a while. For some of the projects we have to work with the Capital Development Board, and that in itself is a lengthy process.”

IDNR also lists farming among its activities, said Ms. Callahan. The department has 35,000 acres of tillable land that is leased to more than 200 tenants. Working to be a good steward of the land and an agricultural model, the department has submitted an action plan to the governor that focuses on conservation of the environment. The IDNR’s leases have become more environmentally friendly and are focusing on regenerative agriculture and soil health. “We now recommend that our tenants plant cover crops because they benefit the soil and wildlife,” she said.

The IDNR’s office of Public Lands is charged with enhancing the state population’s access to land for recreational pursuits. With 97 percent of the land in Illinois privately held and 80 percent of the land owned by farmers, there is little land left for the public. “We have to establish relationships with private owners who might be willing to allow the IDNR to lease their land for hiking or hunting. In some instances, people approach us about taking over their land when they die because they don’t want it commercially developed,” Ms. Callahan said. She added that when the IDNR leases the private land for such things as hunting, it covers the liability insurance. The funding is provided through the federal Farm Bill and IDNR’s Illinois Recreational Access Program (IRAP). There also are tax benefits in the leasing arrangements.

Farmers who own timber land could find the forestry office to be beneficial, she pointed out. The office’s foresters will evaluate the stand of timber for sale purposes and help in eradicating invasive plant species with controlled burns; wildlife biologists also are available to help with the preservation and conservation of the landowner’s natural resources. The state also has its own nursery in Mason City that provides seed stock for native trees and native grasses.

“We continue to review IDNR’s role in the state,” said Ms. Callahan. “We plan to work with universities regarding how we are managing our land that historically has been in row crops. We are looking at the use of solar energy. We are committed to being an example and a leader in conservation.”

Clayton Harris III is an enthusiastic cheerleader for the Illinois International Port District (IIPD). As its executive director for the past three years he has made it a priority to make potential customers aware of what the District’s Iroquois Landing and Lake Calumet port facilities, both of which are on Chicago’s Southeast Side and near the Indiana border, have to offer. There are 19 public port districts in the state. Harris was Chicago Farmers’ November 18, 2019, meeting guest speaker.

“We are the greatest multi-modal facility in North America,” said Harris. “These ports are the logistics hearts and brains of transportation.”

Harris related that the Iroquois Landing Facility has 190 acres and approximately1,600 acres comprise the Lake Calumet facility. In addition to these sites, the District also includes the Harborside International Golf Center, which was constructed over the old city of Chicago’s dump and filled with refuse.

“We have connections to road, rail, and water,” said Harris as he displayed a picture of the ports with nearby interstates and rail yards crisscrossing the properties. “The Chicago facilities are within 10 miles of five United States highways, have access to six of the seven North American Class I railroads, and the sites are the only Great Lakes and inland rivers port. We rank number two behind the Duluth/Superior port. The port processes an average of 17.5 million tons of cargo annually.”

The state’s port system includes 350 private terminals along the Illinois, Kaskaskia, Calumet, Ohio, and Mississippi Rivers, as well as Lake Michigan. Three Illinois ports are among the leading ports in the country.

Harris noted that international ships come through the Chicago sites via the St. Lawrence Seaway; barge traffic comes via the Mississippi River and the Gulf of Mexico.

While the Chicago sites see $37 million in agricultural products at their docks, Harris would like to increase that figure for the facilities and be an economic stimulus for the Chicago area. In 2017, the facilities had total revenue of $1,186,968 and his goal is to increase that by six percent while reducing debt, which he has done during his three years of stewardship.

Harris said that making the facilities more attractive is a key factor in drawing more traffic. He said the state’s capital budget allocated $150 million for the state’s 19 ports and the Illinois International Port District hopes to receive $50 million from that.

The Calumet site has the largest grain elevators east of the Mississippi River, but none of them store any grain. “A decision has to be made to either raze the structures at a cost of $14 million or revamp them for $25 million, although we do have two grain bins to store soy,” said Harris. Additionally, a “ghost ship” that has been moored alongside the grain elevators for 20 years will soon be moved showing ongoing progress and change.

Harris said the IIPD is now involved in a $1 million master planning process that will give it action plans to make the sites more attractive and more cost effective. He added that the District just received $17.5 million that will fund its first capital improvement project since 1981 and include the repaving of Butler Drive, the main roadway through the port district at Lake Calumet, and the raising of rail lines.

“Our master plan will outline what we should, could, and will be doing,” said Harris. “For example, we plan to add a refrigerated shed to the Lake Calumet site so that we can store fresh food products. I want to engage people in agriculture and learn what we can do for you. I want you to incorporate the state’s 19 ports in your thought process.”

The ping of a golf club head striking against a golf ball and the yell “fore” are not sounds usually associated with a farm, but if you are involved in Fairway Farms in Lemont, Illinois, they are common noises that Angelica Carmen, the farm’s manager and Sustainability Specialist, says come with her work location. Angelica was the guest speaker at Chicago Farmers’ October 21, 2019 meeting.

Angelica manages and developed the farm that is located on the site of a former gravel parking lot at Cog Hill Golf and Country Club in Lemont and backs up to one of the four golf courses that have made Cog Hill famous among avid and pro golfers. The two-year-old sustainable farm boasts 4,500 square feet of planting space, 25 raised beds growing 100 different varieties of heirloom plants and edible flowers that are used in Cog Hill’s banquet facilities, 12 beehives (apiary) whose honey is sold to the community, a pumpkin patch, and aclosed-loop composting program that uses kitchen waste mixed with garden refuse to create fertile compost that is used on the farm and, at the same time, mitigates methane-producing landfill waste. “In the 2.5 years it has been in operation, the farm has diverted over 7,500 pounds of kitchen waste from landfills,” said a proud Angelica.

A graduate of Loyola University Chicago, Angelica holds a degree in communication and environmental advocacy and leadership. She has had agriculture internships with Uncommon Ground, which has the first certified organic rooftop farm in the United States, and Loyola’s Urban Agriculture program. Aspiring to be a chef one day, Angelica said her internship with Uncommon Ground taught her how to grow sustainably and to grow for restaurant chefs. Loyola taught her how to manage a sustainable operation.

Fairway Farms does not have electricity or mechanized equipment, does not use herbicides, irrigates from trenches dug under the fairways and a nearby pond, uses mulch that is composed of downed trees from the golf course, and creates its growing materials by recycling things no longer used by the golf course and adapting the items for growing use; for example, old golf cart beds have become planters and wooden turf pallets are turned on their sides to display hanging planters.

“Golf courses can be positive stewards of the environment,” said Angelica. “The golf course has cut its use of fungicide and insecticide by 60 percent as a result of its connection with the farm and our sustainable processes. Additionally, the farm has saved the kitchen roughly $9,000 in produce costs annually.”

Today, a wildflower berm that backs up to the golf course supports the apiary, which produced 140 pounds of honey this season. While most of the honey is sold to the community, some honey goes to Cog Hill’s kitchens when needed for recipes. The farm has a partnership with Pollyanna Brewing Company and grew basil varieties to brew Dubs Delight Blonde Basil Ale. The farm also has planted a lavender bed dedicated to the brewery for Cog Hill’s 2019 ‘Par for the Course American Pale Ale,’ which is available in the golf course’s dining areas.

Pollinator gardens, “Monarchs in the Rough,” dot the golf courses and bluebird houses and bat boxes, constructed by area students, are erected throughout Cog Hill.

Prior to developing the farm, Angelica worked with Cog Hill’s Director of Grounds Operations, Chris Flick, who wanted to delve into sustainability and spearhead a sustainability program for on and off the golf course. Angelica’s job was to grow the culinary farm on a golf course and that she has done.

“We have partnerships with a number of area restaurants and Pollyanna Brewery and we are reaching out to schools,” said Angelica. “Our mission is to educate. Sustainability is giving back more than you take. We are enhancing the ecosystem and reusing as much as we possibly can to to reduce harmful emissions. Fairway Farms grows without any chemicals or synthetics and I see biodiversity strengthening from year to year.”

To increase people’s awareness of Fairway Farms and its sustainability, Cog Hill and its farm were the hosts of two Farm to Table dinners that were held on grounds overlooking one of the golf courses. The produce used on the menu came from the farm and was served.

“Our first dinner served 50 people in August 2018 and the second dinner this September had 70 people,” said Angelica. “Ninety percent of the menu was sourced from the farm. We plan to increase the number of dinners to three or four each year because they are great showcases of our programs and inspiring to people.”

There will be several Farm Dinner events open to the public held throughout the 2020 season, with official dates coming soon. Event information is available on Cog Hill’s website, www.coghillgolf.com/growing-green.

Dr. Gary Schnitkey, agricultural and consumer’s economics professor at the University of Illinois Urbana-Champaign, opened the Chicago Farmers’ 2019 season to a large audience at the September 9th meeting with a discussion on 2019 farm income and cash rents and what the future holds.

“It’s been one of the most unusual years that the Illinois Corn Belt has experienced,” said Dr. Schnitkey, referring to 2019. “The ‘prevent plant’ program and the trade situation dominated the year’s discussion. Northern Illinois, South Dakota and Ohio were the hardest hit by prevent plant.”

He went on to say, “It is surprising how much corn actually did get planted and, in most cases, the corn looks good. However, it is late in development. In a normal season, we would be harvesting corn now, but it is more likely that the harvest will be in October and November. With the late development of the corn crop and the possibility of frost prior to harvest, we could be on a collision course.”

Dr. Schnitkey pointed out that the trade situation with China worsened in May, but President Trump tweeted that MFP (Market Facilitation Program), which was offered in 2018, would continue in 2019. In Illinois, the MFP rates per acre for planted corn ranged from $53 to $87. He said that half of that payment has been received or will be soon by farmers. The remainder is not guaranteed. If the remaining funds do come, they could appear as late as January. “I think the payments will happen,” he said.

Dr. Schnitkey noted the average MFP payment this year is $20 to $30 higher than last year. People involved in the prevent plant program, received $15 an acre. “The ad hoc Disaster Assistance Program has allocated $3 billion for MFP and targets prevent plant acres,” he added.

The MFP was critical this year for farmers’ revenue, as were the ARC (Agricultural Risk Coverage) payments. Dr. Schnitkey advised farmers and landowners to postpone signing up for these programs now and consider doing so in November or December when it is clear which program will have the highest payout.

Crop yields will be lower in 2019 for Illinois, he said. The USDA projected 180 bushels of corn per acre and 55 bushels of soybeans per acre.

“We have had phenomenal yields since 2013,” said Dr. Schnitkey. “No one is predicting the same yields as last year.”

He noted that the trade dispute with China hit the U.S. soybean market hard in May. Since then soybeans have been below $9 per bushel and could go as low as $7. The futures prices are at $8.80. Corn is continuing below $4 per bushel.

“Corn prices could go higher through lower yields,” he said. “I don’t see how soybean prices could go above $9, even if the trade issue is resolved.”

He related that the swine flu in Asia and Africa is reducing herds by 20 to 40 percent, which affects the need for soybean meal to feed the stock, and there is a large carry-over of soybeans. Dr. Schnitkey said that 2019 probably is not going to be a good year and 2020 looks like another scraping by year.

Cash rents

Dr. Schnitkey said that cash rents in Central Illinois ticked up slightly in 2019, but that is not projected for 2020.

Land Productivity 2019 cash rent 2020 cash rent (expected)

Excellent $302 $298

Good $261 $254

Average $212 $205

Fair $170 $167

He noted that the USDA would release the cash rent numbers for the state’s counties during the third week of September and the information would be posted on Farm Doc.

In response to a question, Dr. Schnitkey said there is a growing percentage of variable cash rent arrangements. These are primarily used by professional farm managers. He said that variable cash rents are involved in about seven percent of land in Illinois. He said the trend is to move from share rent to cash rent. “The trend is a move to cash rent because farmers and landowners want simpler leasing arrangements,” he said.

Dr. Schnitkey noted that most farms are still in strong financial positions. He said, “I believe farmers are thinking there will be better prices in the future and they are going to hang on to their land. They believe that once they let go of their land, they will not get it back.”

He said that it is projected that farmers’ debt to asset ratio will increase; working capital will decline. Additionally, the fall fertilizer prices are holding steading and not decreasing. This also is true for seed and pesticide costs.

“Farmers will have to cut costs in the machinery area or in cash rents. However, if new machinery is not brought on, it could mean more money toward repairs,” Dr. Schnitkey remarked.

In response to a question from the audience, Dr. Schnitkey said he did not see yields slowing too much because technology was in place to increase yields. “We know how to farm more acres,” he said.

Regarding digital technology, he noted that it is being used by farmers in one form or another, but it’s what they do with it that makes the difference. Dr. Schnitkey said, “I think there is a lot of data that are collected and people wonder how to use it.”

He added that consumers have changing views on food. They are not only concerned about lower prices, but they want more amenities in their food. They care how food is produced. For example, they are focused on the production of more non-GMOs.

“This will change Ag production, we will see more non-GMOs. But the consumers’ demands are fickle. Today it is non-GMOs, but what will it be in 10 years? It is a moving target,” said Dr. Schnitkey.

Vasili Russis, of Kelleher and Buckley, LLC, was the guest speaker at The Chicago Farmers’ May 13th annual meeting at the Federal Reserve Bank of Chicago. A lawyer and a CPA, Russis related that he has found himself dealing with many litigation cases in recent years when “estate plans go south.” His goal was to help the May audience members avoid these kinds of situations when they are involved in estate planning.

“In many of the instances, parents gave farmland property outright to their children,” said Russis. “When several surviving children are involved, it only takes one to have a problem.” He noted that the only one who benefits from these disagreements that end up in litigation is the attorney.

Russis said, “A little bit of planning will help in a long way in passing on property.”

He noted that there was no established centralization in these inheritance situations. “We look at setting up an LLC (Limited Liability Company) so that there is centralization,” Russis said. “Normally, one person manages the LLC. It could be a family member who best understands farming or someone outside the family who is trustworthy. The family comprises the membership of the LLC. These family members are the investors.”

Russis said that an agreement as to who should be the manager is needed and it is best to cover this when the parents are alive.

The benefits of an LLC, which is more effective than a corporation, include:

Eliminates partition threat (a sale of the property can’t be forced)

Provides litigation protection

Allows a key person from the next generation to serve as manager. The patriarch or matriarch could serve in this position until he or she is unable and then a person from the next generation could step in

Provides a shield for individuals against creditors; contracts are with the LLC, not with the members of the LLC

Russis pointed out that the fiduciary duties of the LLC fall upon the manager. It is the manager’s responsibility to ensure that the property is being properly administered, that fair rents are collected, and that the owners are aware that there is a potential buyer for their property. The manager also would ensure that the LLC would file the 1065 tax form in a timely manner.

“The manager has to be someone you can count on, who is trustworthy and transparent,” said Russis.

Russis said that setting up an LLC in Illinois has been more attractive in recent years since the state has changed its laws that pertain to this structure. Filing in Illinois is a cost savings rather than having to file in either Nevada or Delaware.

Regarding asset protection strategies, he noted that a multi-member structure gives protection against outside creditors. “An outside creditor who deals with the farm operation does not have any rights regarding the members of the LLC,” Russis said. “There also are ‘poison pill’ provisions that can be part of the LLC that make the property unattractive to outside creditors.

He said that trusts can be a good asset protection vehicle. A self-settled trust (which is created by the parents) will not protect parents, but protects future beneficiaries because it becomes an irrevocable trust upon the death of the parents. The trust owns the property.

A spousal limited access trust also can be established as an asset protection vehicle. The trust involves each parent and it allows them to deed property to an irrevocable trust. The parents are protected from creditors in this trust.

Russis said another vehicle is the power of appointment support trust (POAST). It is useful when aging family members and younger generations own real estate and there is a low basis property with a high fair trade, which results in capital gains. The property is transferred to an irrevocable trust and the older generation is a beneficiary and given a power of appointment. The transfer of the property to the trust allows for a future step up basis so that the unrealized gain is eliminated on the death of the older generation family member holding the power of appointment and in turn reduces gain in the future due to the step up in basis.

Russis said that caution has to be taken with the POAST because the current landowner can’t be a beneficiary if it is a newly established trust; however, an added power of appointment in the trust may allow the property to be given back to the landowner.

Regarding tax deferrals, Russis noted the like kind exchanges, known as 1031s. The 1031 can only be used for real estate, farm equipment is no longer eligible. He said that the property one wishes to buy in this exchange must be identified within 45 days and it must be purchased within 180 days. The basis of the new property carries over to the basis of the relinquished property.

“It is important to find the replacement property ASAP,” said Russis. “It is possible to do a partial exchange, but there will be a slight tax liability on the gain. Additionally, when the LLC is selling the property, it has to reinvest in the new property. If not all members of the LLC want to reinvest, the LLC must be liquidated and a new one would be formed with the members wishing to buy the property.” For a liquidation, Russis mentioned the liquidation should be planned well in advance of a sale.

Russis noted that if an LLC does not have the funds to buy out a member, financing could be arranged or the party could be given a promissory note from the LLC.

Both Todd Slock, regional manager appraisal at Compeer Financial, and Eric Wilkinson, accredited farm manager, real estate broker, and auctioneer at Hertz Farm Management, Inc., agree that farmland values have changed little during 2018 and they see a similar situation going forward. The two men were the guest speakers at The Chicago Farmers’ April 8th meeting. Compeer is a Platinum Sponsor of TCF and Hertz is a Gold Sponsor.

“There has been little change in farmland values in 2018,” said Wilkinson, whose territory covers the northeast quadrant of Illinois. “Excellent quality land is up about one percent, and good quality is down about one percent. The data show average quality land up eight percent, but that is because larger, better quality land with more irrigation sold in 2018 than in 2017. We’ve seen that the primary buyers of good farmland during 2018 were current farmers. Recreational land is up seven percent, with land values highest for plots near metropolitan areas. Transitional land values are spotty and there is a wide variety of values.” The majority of Wilkinson’s information was provided by the 2019 Illinois Land Values and Lease Trends Report by the Illinois Society of Farm Managers and Rural Appraisers.

Regarding sale prices per acre, Wilkinson said that excellent farmland had an average sale price of $10,722; good farmland, $8,200; average farmland, $7,400; fair farmland, $5,000; recreational land, $3,500; and transitional land, $11,000 across the state of Illinois.

A long-term view on land sales indicates an increase in the value of average and fair quality land, said Wilkinson. He added that overall, more sales of higher quality property sold in 2018 versus 2017. “We sold a number of bigger farms,” he noted. “A lot of the value comes from the larger, more efficient farms.”

Wilkinson observed that some investors are seeking second tier and third tier quality land because excellent quality land does not always post the best returns. “These investors believe that the lower quality land can generate a better return on their money in the long-term,” he said.

Among the buyers involved in the sale transactions, survey results indicate that 59 percent are local farmers, 12 percent are non-local farmers, 15 percent are local investors, and seven percent are institutions.

“The reasons for selling vary,” said Wilkinson. “Many are settling estates. Some use the money for things other than farming, while others pay down debt with the proceeds. It remains to be seen if active farmers in 2019 will be involved in sales to pay down debt.”

He said a lot of people are interested in buying farmland, but not as many are interested in selling, unless they are forced into a situation, such as an estate sale.

“Farmland is a great diversification tool in a portfolio. It is a great long-term, conservative asset class that is difficult to mimic. There is uncertainty in paper assets, but land is tangible and it produces yearly,” said Wilkinson.

He went on to say that factors that contribute to the current stability of farmland values are farmers and investors willing to compete to control land that is near them or touching their land and they are willing to pay a premium; buyers’ confidence on yields; and the Market Facilitation Program, the federal government’s aid to farmers to help cover losses caused by the trade wars. “A lot of money went to farmers this year through this program,” Wilkinson added. “Farm income increased slightly in 2018, which propped up the land market.”

Wilkinson shared that survey results show a slightly higher lease turnover rate due to retirements. Overall, operators are willing to take some losses in the short-term to grow their operations in the hopes that something will turn the corner, he said.

“For land owners and tenants, we suggest avoiding long-term leases so that you are able to capture the current market,” related Wilkinson. “If you are not getting the rent up front, secure a second payment with some kind of irrevocable letter of credit or UCC-1.”

Slock, whose area includes northern Illinois and parts of Wisconsin and Minnesota, noted that Compeer tracks the benchmark farms that it appraises each July 1st. He said that farmland values have aligned with corn prices. He noted that from 2010 to 2014, the peak in land values was driven by low interest rates and strong commodity prices. From 2016-2018, the benchmark farms range from an increase of 17 percent in land values to a decrease of seven percent. There are 19 benchmark farms in Slock’s Illinois territory, one of which is recreational land.

In discussing cash rents per acre, Slock noted that on Class A farms, they range is $240-$350; Class B, $220-$328; and with Class C, $215-$300. “We anticipate these ranges to be fairly consistent from last year to this year,” said Slock.

While land values did not surge ahead during 2018, Slock said prices were fairly steady from 2017 into 2019. “A lot, of course, depends on location,” he said. “Additionally, commodity prices will keep downward pressure on land values in 2019. There was an increase in interest rates in 2018, but this had a minimal affect. Generally, things were not as bad as we had anticipated.”

During a panel discussion moderated by David Oppedahl, a TCF director, Slock and Wilkinson responded to questions posed to them by audience members. Their responses included:

If there is an increase in the real estate tax rate, which has been discussed, it could put land values under a lot of pressure.

Both Slock and Wilkinson said that the occurrences of farmland auctions are down. They noted a lot of emotion is involved in the auctions and a straight real estate sale dealing with one buyer is preferred. They saw a downward trend for auctions in 2019.

The value of turbines on farm property varies on how the leases are structured. The income is derived from the turbines and can range from $6,000 to $12,000 per year. If the wind turbine does not adversely affect production on the land, then there is minimal impact on the land value. The size of the access lane could be an issue.

Regarding trade with China, anything that disrupts the United States’ relationship with China will have an impact on commodities. China will seek cheaper soybeans, which South America can provide. More influx of cash for American farmers from the Market Facilitation Program is not expected. On the other hand, there are other markets for U.S. soybeans and the demand is still there, which is why prices are not significantly lower.

Regarding the aging of the American farmer, Slock said there was an even trend in estate sales of farmland; he did not see a significant shift. However, the age of the average farmer is increasing and it is harder for younger people to get into beginning farmer programs. Wilkinson commented that the floodgates of available land could open eventually through estate sales and the concern is that there will be a greater supply of land that can be handled.

In discussing the recent legal battles involving Round-Up, it was noted that Round-Up does not have the impact on farming that it once had due to the appearance of many resistant weeds. If unable to use Round Up, progressive farmers would work around it, although it could be a concern for some farmers because of their wide use of the product.

A question regarding drainage was addressed. It was noted that tile contractors are busier than ever. “It is not hard to see how one can improve a farm and pick up gains by properly draining the property,” said Wilkinson. Added Slock, “Tiling and irrigation systems are very cost effective because you are spending money on something that will add bushels to your production.”

McDonald’s sleek new headquarters on Randolph Street in the Fulton Market district was the setting for The Chicago Farmers’ March 11th meeting. TCF visited McDonald’s to learn about the important role that sustainability is playing in the company’s operations. The visit was in order because TCF had presented its Distinguished Service to Agriculture award to Ray Kroc, McDonald’s founder, in 1979.

In 2018, McDonald’s kicked off its “Scale for Good” program, which addresses sustainability, said Townsend Bailey, of McDonald’s North America Sustainability. He served as TCF’s co-host along with Tess Mattingly, of McDonald’s U.S. Public Affairs. “The value that McDonald’s offers is high quality food at affordable pricing that is accessible to the public,” said Townsend. “We are able to do this due to the efficiency of our system and how we work with our franchisees and suppliers.”

Townsend pointed out that this is not a fad, but has been part of McDonald’s focus since its inception. Making this point, Townsend played an audio portion of a presentation given by Kroc in 1957. At that time, Kroc said that McDonald’s had to be “ethical, truthful and dependable.”

Townsend added that Kroc’s focus was restaurants that served safe food and were litter-free and clean. Over the years McDonald’s has maintained this focus and eliminated such things as styrofoam containers and replaced them with paper. The Alaskan Pollock fish used in the fish sandwich is caught wild and meets the standards for sustainability. The double cheeseburger? The only ingredient is beef, with salt and pepper added as it cooks.

Townsend said, “There are a lot of efficiencies that come with being big. McDonald’s has 37,000 restaurants in more than 100 countries and these restaurants serve 69 million people per day. We are using our scale for good.”

The Scale for Good program was built on answers from consumers to McDonald’s question: What issues are important to society? The answers:

Beef sustainability

Commitment to families

Packaging and recycling

Climate action

Youth opportunity

McDonald’s has adopted the concept that sustainability means to continue into the future indefinitely in ethics, the environment and the economy, said Townsend. The roof of the downtown headquarter building features a vegetable garden and composting. Crops from the garden are donated to charities.

The Scale for Good program includes commitments such as:

By 2025, 100 percent of McDonald’s packaging will come from renewable, recycled or certified sources

By 2025, all McDonald’s restaurants will recycle guest packaging (Townsend noted that this is challenging because every municipality has different regulations and infrastructure, but McDonald’s plans to be a part of the solution and help influence powerful change.)

Continue on its food journey

*McDonald’s USA is committed to only using eggs from cage-free chickens

*by 2022, 50 percent of Happy Meals will be 600 calories or less, 10 percent of the calories will be saturated fat, will contain 650 milligrams of sodium, and only 10 percent of the calories will be from sugar

In further commitment to families and in support of education, McDonald’s has distributed 370 million books in its Happy Meals

To further beef sustainability, McDonalds will engage with the beef industry, NGOs (non-government organizations) and the U.S. Roundtable (The vast majority of McDonald’s USA’s beef comes from North America, said Townsend.)

Townsend went on to say that many of McDonald’s suppliers have been with the company since 1955. He noted, “If a supplier doesn’t meet our expectations on foundational aspects, it is out; however, our position has always been to partner with our supply chain on our shared goals.”

Following the presentation, the attendees were divided into groups and led on a guided tour of the McDonald’s facility. The nine-story glass and steel building, located at 1045 W. Randolph St., was designed by Gensler Architects and developed by Sterling Bay. It was designed to blend in with its surrounding buildings, which were largely meatpackers at one time. McDonald’s leases its space from Sterling Bay. While a McDonald’s restaurant is on the ground floor, there are no large golden arches, just signs bearing small golden arches.

About 2,000 people are employed at the site, although the number varies daily because each employee is given the opportunity to work from home one day a week. When at the Randolph Street location, employees work in open spaces. They are not assigned a specific space and may move around to a different location each day. This is called “hoteling.”

As our guide, Megen DiSanto, of McDonald’s Public Affairs, led us through the building she pointed out the wall of toys from Happy Meals of bygone days, displays of McDonald’s memorabilia such as the original malted milk equipment that captivated Kroc and the packages of food items that are no longer on the restaurants’ menus, the Quiet Rooms that are located on each floor for employees to work in silence, sans cell phones, and the culinary lab where McDonald’s employees are able to use old and new equipment and create and taste test new recipes. Hamburger University is onsite for the training of owners/operators.

The building also houses a Work Café on the sixth floor for global presentations and includes a dining area in conjunction with a McCafe. A feature of the Work Cafe is a stadium-like seating area that is designed to inspire more collaboration among employees, Megen explained. It faces a wall of windows with a stunning view of Chicago. Another gathering spot for employees is on the ninth floor and provides socializing and after-hours cocktails on select evenings that can be purchased by the employees. A terrace adjacent to the space has seating in nice weather and is available for short vitamin D breaks. McDonald’s also offers a gymnasium for fitness classes. In summer months, yoga classes are conducted on the terrace.

Roger Clark, senior vice president, Real Estate Division at Northern Trust, and Mary Jane Rozypal, senior vice president, Specialty Asset Regional Manager- Farm and Ranch Services, at Bank of America, N.A., have some 60 years of experience between them and they have gleaned a lot of knowledge in their dealings with land investors. The two shared their thoughts during a panel discussion with Mark Thorndyke, Chicago Farmers president, who served as moderator, at the February 11th meeting.

Following is an overview of the discussion with Mark posing questions and Mary Jane and Roger responding:

Mark: Why would one consider farmland as an investment?

Roger: It offers good long-term appreciation. Farmland is an easy, simplified asset versus an apartment building or shopping center where such things as roofs and heating and air conditioning systems are concerns.

Mary Jane: We have clients who are pure investors who are seeking a good, solid investment that brings diversity to their portfolio. Farmland has a good return. Investors use it to reduce volatility and hedge against inflation. There also are accounts that have been held a long time, “heartstring” or “legacy” assets. After a number of years, the landowner realizes that the property has increased in appreciation a great deal.

Mark: What should a client consider when investing in farmland?

Roger: I focus on the client’s overall need and what the personal family structure is. I have a number of successful clients who are seeking second, third and fourth generation investments for the long-term. The farmland ties up the money for the younger generation and still keeps working for them.

Mary Jane: Purchases of farms should be considered long-term investments, at least a 10 year hold. The client has to understand that there are ups and downs in cash flow; it will follow the commodities market. Farmland is never worthless; there always is someone who will lease the land. People who want really big returns and no risk are not the right purchasers.

Mark: Over the years, what changes have you seen in farms?

Roger: Change is in all forms and it is fast. Farming is more complicated today and more sophisticated. These are not negatives, just factors. I am amazed at the level of financial and technical sophistication that the operators have today over those of 40 years ago.

Mary Jane: I agree that the change in technology has been amazing. It has supported the collection of tremendous amounts of data that make farming more efficient and more productive.

I am not seeing farmers buying as much farmland as they did in the past. They are more likely to lease land. Farmers can’t afford to buy a lot of land and still have money for equipment.

Regarding ranches, the value of the ranchland has outpaced its productivity. Legacy ranchers are still doing the traditional things, but they are diversifying. They are using wind and solar where it is feasible. Many of the people are learning that a lot of money can be generated from having a hunting license for their property. Instead of doing things like the older generation, they are embracing ways to turn the ranch into a modern business.

Mark: What are the biggest concerns that farm investors have today?

Roger: They are concerned about unpredictability and government influence. In the 1980s, the Russian grain embargo played havoc with farms for years. Last summer, the China and soybean situation impacted farmers. If an event is on your radar, you can plan for it. Surprises are the biggest obstacles. They tend to be out of your control and have a significant impact on the operation.

Mary Jane: The trade wars are a concern, but I believe the government will do what it can to resolve the situation. On the positive side, I think that farmers are getting more adept at dealing with their lenders. Also, technology is on the side of the farmers. They have to be able to produce more yields, get more off of less and less land. The world depends on the American farmer.

Roger: I see more people trying to manage their risk portfolio by not being highly leveraged. You can weather a year or two of uncertainty when you are not highly leveraged.

Mary Jane: The percentage of leveraged farmland is at a historic low. The age of the farmer is at a historic high. In instances where there is no family to take over the farm, farmers have taken a young person, often with a college degree in agriculture, under their wing, then turned the operation over to them when the farmer is ready to retire. This enables young farmers an opportunity to build a successful farming operation.

Mark: What have you seen in succession planning?

Roger: Some people use a trust instrument, but many use LLCs as ownership vehicles because they can put rules and formulas in the operating agreement and a plan for being bought out of the farm. When it is written into the LLC, it is easier to get out of the farmland and the angst and emotion are removed. One does not have to start a conversation about succession because it is detailed in the LLC.

Mary Jane: Many people have gone away from trusts and have moved to LLCs, which can be a good choice if there are competent people to run them. A trust can hold shares of the LLC, so keep this in mind as well. If there is family drama, consider the worst things that can happen and plan for that. Be honest with your advisor and inform them of potential challenges.

Roger: Have conversations with family members about the plans for succession and have a good advisor.

Mark: When hiring a farm manager, what questions should be asked?

Roger: Hiring a farm manager is like a job interview. Learn what the person’s track record is, their history, and ask about other properties they have taken care of. Ask questions; it’s your life and your assets.

Mary Jane: Institutions like Northern Trust and Bank of America operate under a fiduciary platform. We have high standards that we have to abide by. We have to look out for your best interests whether managing assets as trustee or an agent. The people involved in financial institutions like ours have Ag backgrounds and experience and education in agriculture. When an asset manager leaves, we have someone that can step in and manage your asset, not always the case with a smaller farm asset management company. Consider the safety of the asset when selecting a farm manager.

Technology is becoming an important part of farming and is moving forward at a rapid pace; however, its functions are not taking into account the needs of the landowner, according to Corbett Kull, the guest speaker at the January 14th meeting of The Chicago Farmers and the founder and CEO of Tillable, an ag tech company that is designed to help landowners become wiser about their holdings.

“Tillable’s goal is to help the landowner become better at what he is doing,” said Kull, who also is a founder and a principle of 640 Labs, a Chicago-based technology company (acquired by The Climate Corporation in 2014) that collects, stores, and visualizes agricultural data to help growers improve their operations. “Tillable is able to guide the landowner through several considerations that will strengthen a landowner’s position.”

Kull said a landowner must:

Pick the best grower for your farm

Establish a fair rent

Sign a lease, do not conduct business with a verbal agreement

Ensure you are paid on time

Acquire data about the farm, such as yield maps and the fertilizing schedule (Tillable works to get this data in an easy manner and provides it to the landowner)

Reduce “headaches” associated with managing farmland investments

Kull said that agriculture is changing, but the tools that can help landowners have not kept pace with the times as they have for growers. He noted that there have been tremendous productivity gains in farming--outputs are up by 107 percent during the last several years and yields on corn and soybeans are up. Kull also shared that the amount of land being farmed today is down from previous generations. Much of the best land is taken out of production due to subdivisions, he said.

“As we move forward, the greatest gains in agriculture will be due to automation,” said Kull. “There is more professionalism in farming. The young people who are coming out of college have more tools and capabilities at their disposal than their grandparents did.”

Kull commented on the development of autonomous tractors and showed a brief video of the tractors in action on a farm in Iowa. While not in widespread use now, the tractors will be in the near future and landowners will then have more options available to them. “In the future, there will be less labor and more data; landowners need to be more sophisticated. Landowners have to know what their land is worth and Tillable is making sure that landowners know that worth,” he said.

Major problems facing landowners are how to connect with effective and efficient growers and how to set the rent. Tillable works to bring the landowner and the grower together and provides the data necessary to set a fair market rent.

Through accumulation of data, Tillable is able to make a landowner aware of the worth of the farm. At the same time, it works to ensure the landowner gets the most qualified grower for the farm. Kull said Tillable gives the landowner access to information about a potential grower that indicates if the grower will be a good steward of the land based on past performance.

Kull stressed the importance of obtaining several growers’ offers and setting up electronic payment schedules. He said that landowners who have worked with Tillable have received more offers from growers and have increased rent proceeds by 35 percent. “Think of Tillable as Airbnb plus Zillow plus a farm manager on a digital platform,” related Kull.

Currently, Tillable’s client base includes 500 landowners and 4500 growers. It operates across 10 states. Kull said that Tillable receives a two percent fee from both the landowner and the grower on a transaction. He said there is no obligation for a landowner to change their grower, but Tillable provides access to a wider network of area farmers.

Kull said that Tillable collects data from leases and taxing bodies and creates a report that is available to landowners. It also obtains prior yield data, soil test results, and proof of fertilizing that is available to the grower. A grower creates a profile that contains his farming practices, references, and banking references.

“Typically, the leases are for one year so there is flexibility for the landowner and the grower,” said Kull. “At times, rent rates need to be raised or decreased. The important question to ask yourself is, ‘does my farm meet my expectations?’ Tillable is designed to give you the answer.”

Tom Vilsack, who served as secretary of agriculture from 2009-2017, stressed the importance of the combined industries of agriculture and food in today’s economy during remarks he made at the Chicago Farmers’ December 10 meeting at the Union League Club of Chicago,

“It is very important to reeducate the public about agriculture’s and food’s contributions to the United States economy,” said Vilsack, president and CEO of the U.S. Dairy Export Council. “The two really comprise one industry; an industry that employs 43 million Americans or 28 percent of the workforce, has a $6.7 trillion impact on the American economy, and enjoys a trade surplus with other countries. In short, it is a really important industry.”

He pointed out that the strength and productivity of the agriculture and food industry ensure that the United States is capable of feeding itself. “All the nations that are causing us problems don’t have the security of being able to feed themselves; they rely on others. We are a more secure nation thanks to farmers and ranchers,” remarked Vilsack.

Vilsack pointed out that many of the troubled countries around the world don’t have a functioning agriculture industry. As a result, those countries have a lot of hungry and unemployed people.

He noted that the agriculture and food industry has a keen understanding of the significance of trade: 20 percent of all agricultural products in the United State is exported. The exports include 50 percent of soybeans, 40 percent of wheat, 21 percent of corn and pork, and 16.3 percent of dairy.

Vilsack shared that the dairy industry’s experience is instructive and reflective of trends regarding trade. He said that the American dairy is the best in the world and the most productive.

“In 1950, the average cow in the United State produced 5,500 pounds of milk. Today, it produces 23,000 pounds,” he said. “The reason for the increase is due to more efficient farmers who are more technically savvy and have a keener understanding of a cow’s digestive system. Additionally, cows are equipped with fitbits that are providing important data.”

While productivity has increased, consumption has not. Vilsack said that there are more alternatives available, such as energy drinks and carbonated and caffeinated beverages. As a result, not as much milk is being consumed as is being produced. Additional challenges are the “alternative” milk products that do not have the nutritional value of natural vitamins that milk has, but still use the name milk.

This lower consumption in the United States makes exporting a key factor in the viability of the dairy industry. However, it also has its challenges:

United States has a strong dollar

There is an oversupply of dairy in Europe

The European dairy industry is heavily subsidized by the government

However, noted Vilsack, while the European dairy farmer has years of experience, he does not have the natural resources that the United States farmer has. The European farmer is more constrained geographically than we are and knows that at some point he will be unable to compete with the United States, said Vilsack. To combat this, the Europeans put protections in place that prohibit use of identifications of certain cheeses, for example, that are made in the United States and not in Europe.

Trade policies also are a hindrance. Vilsack related that the United States buys more from China than it buys from us. Additionally, China puts a number of conditions in place for trade to take place. “For example, the Chinese want the technology that comes with the production of many items, but they are unwilling to let us know the identity with whom they might share that technology. The administration has a point to ask China to change its policy, but, I believe, it will be a long and protracted discussion,” said Vilsack. “It is hard for a country to acknowledge that it has to change its way of doing business.”

Vilsack said that another trade problem is that the United States also enters into trade discussions by itself and does not encourage others to join it when it is renegotiating trade agreements.

Also, the thought that the United States could “out-tariff” China is a mistake. “China owns a portion of our debt and can use that to possibly impact interest rates,” Vilsack said.

Regarding the exporting of United States soybeans to China, Vilsack said that China knows it is over-reliant on one supplier, so now it is turning to South America, despite the fact that our soybeans are superior. China also is asking its livestock industry to look at other kinds of animal feed and it is turning to Russia for support.

But there is good news. The United States has a story of innovation that will encourage domestic consumption and increase exports; it is not constrained by natural resources; and its cheeses are winning international competitions.

“We also have a new and emerging opportunity for sustainability; there is a product in development that will reduce the emission of methane from cows,” Vilsack said.

Vilsack noted that the United States’ regulatory system is not keeping pace with change. “The government has to understand that it needs to keep pace with change and not just be reactive,” said Vilsack. “We over-test and over-examine things. We make the process slow. We have to have systems in place that will let us test, but get the product to market sooner.”

Vilsack suggested that responsible marketing has to be encouraged and consumers have to be educated to be more skeptical of claims. Additionally, better branding has to be in place in the export markets and alliances have to be promoted with organizations in other countries so that the United States is aware of the tastes of foreign consumers. For example, the dairy industry is producing lactose free milk for Asians and adjusting the taste. “We’ve learned there is not just one way of doing something. We have to adjust to other countries’ tastes. The dairy industry is partnering with universities in other countries to help us with this,” Vilsack shared.

Tariffs, threatening trade wars, droughts, and global politics are affecting our agricultural markets. Steve Freed, vice president of Grain Research for ADM Investor Services, was the guest speaker at The Chicago Farmers’ November 12 meeting and he shared his opinion on what the future holds for agriculture.

Factors affecting prices, according to Freed:

Weather, the 2018 droughts in Argentina, Brazil, Europe, and former Soviet Union created a premium in pricing.

macro-economic conditions such as tariffs, which began taking the premium out of the market place.

effects on the Chinese economy are causing volatility in the stock market.

balance of payments and trade deficit; the United States exported a lot of production to China in the 1980s and today the U.S. does not have the labor or the ability to replace it. China has to buy $200 billion worth of goods from the U.S. to balance trade.

Freed noted that the global demand for grain increases each year and grain production increases to meet this demand. In November, the price of wheat was $5, corn was at $3.60, and soybeans were at $8.60. “Regionally, farmers should use these prices,” said Freed.

He noted that the Chinese will continue to consume grain at a record pace. At the same time, world wheat and corn stocks are at a record high.

Freed said that the world is eating more meat, which means there is a need for more protein, such as soybean meal, to feed that situation. Additionally, wheat production is growing.

“The bad news is that the United States is losing its share of the corn and soybean markets and this will continue into 2019,” said Freed.

He said that it is forecast that Argentina and Brazil will bounce back to record production in 2019. Brazil already has planted soybean crops that could be ready to ship in January. “It is possible that we might be able to sell soybeans to China in January if there is a resolution to the trade problem,” said Freed.

Freed noted that with the drop in soybean prices, it is expected that farmers will switch to corn. It is anticipated that 93 million acres will be devoted to corn in the United States versus the current 89 million acres.

He went on to say that he did not think there would be a deal between the United States and China at the G20 meeting on November 30; however, if there is, beans could be at $9.00, if not $7.75.

Russia has taken over the wheat market and has produced 80 million tons of wheat. Freed noted that agriculture is 17 percent of the Russian GDP. In the United States it is less than two percent. “The Russian’s goal is to increase its wheat production to 100 million tons. If they do, we don’t need to produce as much,” related Freed.

He noted that China’s economic growth is slowing. It will try to stimulate its economy, which would happen through a deal with the United States. “The Chinese economy is slowing. China may need a deal in 2019 to help its economy.”

Regarding soybeans, Brazil ships 77 million tons of soybeans a year and the United States ships 52 million tons. China is the biggest buyer of soybeans in the world and the government is attempting to reduce its need for soybeans by encouraging the Chinese people to eat fish. Last year, the United States shipped 28 million tons of soybeans to China.

Freed said the market does not forecast an increase in farms’ net income in the United States. Costs are increasing and farmers are not seeing the returns on their yields.

Freed said the 2030 farm structure will change. “The farmer will have to be a CEO and have a strong grasp of technology to be successful. I think we will see more of a connection between farmers and the companies that will benefit from the farms’ output,” he said.

“The United States farmer is the best farmer in the world, but Brazil is catching up,” said Freed. “Outside of the United States there is a lot of growth in yield technology and costs are less in other countries.”

Freed said that growth for agriculture is flat. He noted, “I don’t see substantial growth for at least the next 10 years.”

A mother’s desire to ensure that each of her three sons had pumpkins to carve for Halloween, spawned a pumpkin farm operation that gave new life to a family farm and is still going strong after 30 years.

“In 1977, when our three sons were young, my wife decided to plant pumpkins in the garden so they would have Halloween pumpkins,” related Chicago Farmers’ October meeting speaker Bruce Condill, of The Great Pumpkin Patch in Arthur, Illinois. “The patch did well and increased in size over the years. So much so that the boys set up a farm stand and sold the pumpkins. The proceeds paid for seeds for the next crop. We also invited our boys’ classes from school to visit our working farm, see the pumpkin patch, select a pumpkin to take home, and interact with our animals.”

In 1988 when a severe drought threatened the Condill family’s corn, soybean, and alfalfa crops, those pumpkins sparked an idea to sustain the family farm, which had been in the McDonald family (Bruce’s wife’s family) for five generations. Mrs. Condill’s family migrated from Virginia to Arthur, Illinois, in 1859. “We were struggling in 1988 with the cash crops,” said Bruce.

“My wife suggested that we expand the pumpkin patch with a variety of displays and mazes and open our farm to the general public,” said Bruce. “It was a great idea. I don’t think we would have made it without The Great Pumpkin Patch.”

Today, The Great Pumpkin Patch, which sits in the middle of Amish country, welcomes more than 60,000 people during the harvest season, which runs from September 10 through October 31.The farm is open daily from 9 a.m. to 6 p.m. It grows 300 varieties of pumpkins, squash, and gourds on 63 of the farm’s 200 acres.

“We have three missions: the Homestead Bakery, the Great Pumpkin Patch, and Homestead Seeds,” said Bruce. “Amish bakers produce the baked goods for the bakery. Our son, Mac, is in charge of Homestead Seeds. Our goal is to encourage the ordinary farmer to grow more gourds, pumpkins, and squash. Mac and his wife, Ginny, also own and manage The Homestead Bakery and The Great Pumpkin Patch.”

He went on to say that the farm provides a safe place for people to experience the harvest season and get connected to the land and each other. “We want them to know where the food they eat begins,” said Bruce.

Squash, gourds, and pumpkins have a range of maturities from 70 to140 days. Plantings are intended to be done on May 20, June 10, and June 20. “This year was wet, which altered the intended planting dates, and was not good for pumpkins, but great for soybeans and corn, which we still raise,” said Bruce. “When the growing season is ended, we disk the remaining pumpkins into the soil and then soybeans are planted the following spring. When the soybeans follow the pumpkin crop, they are three to 12 bushels better per acre than when they follow corn. The pumpkins are a great fertilizer.”

He noted that Mac is an expert on pumpkins and gourds. He works with seed companies and sometimes grows experimental seeds. Mac also works with botanical groups from around the world and with university specialty crop people. Bruce noted that Mac appeared on the Martha Stewart Show three times to discuss gourds and the many varieties that are available. The Great Pumpkin Patch also was featured in an issue of Martha Stewart’s magazine.

“The Great Pumpkin Patch has many unique ways of displaying all of the varieties that Mac has introduced to the farm,” said Bruce. “The Patch boasts a Survivor squash, which came from a Kentucky farmer whose seeds came from a Holocaust survivor, thus its name. The Patch has African, Asian, European, Australian, New Zealand, and Central and South American gourds, pumpkins, and squash.”

The heirloom seeds used in the 63 acre pumpkin patch are purchased from commercial and private seed companies and also include seeds raised by Mac in his isolation plots. These plots are planted at least one-half mile from any source of a cucurbit vine plant. Bruce said that neighboring farmers allow them to use plots on their land so that seed purity is assured. Seeds are not taken from the large pumpkin patch because of the risk of cross-pollination.

While the Great Pumpkin Patch is a highlight of the farm, there also are mazes, animals, and a restored one-room 1912 schoolhouse. The school and other attractions bring 4,000 school children on field trips to the farm in October. In June, the farm sponsors the “Back Forty,” which is a Hob Nob arts and crafts event that features 75 vendors, crafters, and musicians. In the past, the Condills were hosts of “Farm to Fork” dinners that were attended by 100 diners at $80 a plate.

“It was a five course dinner that included meat from our Amish neighbors’ farms, vegetables that were locally sourced, and wine from a winery,” said Bruce. “It was a wonderful way for people to learn about the source of food. It connected the farmer to the chef and to the people who ate the food.”

The Great Pumpkin Patch also has been responsible for decorating Country Living fairs throughout the United States with its many gourds and squashes and flowers. The farm also decorated the White House grounds one year for a Halloween party. “It was a great experience,” said Bruce.

Dr. Gary Schnitkey, the speaker at the Chicago Farmers’ September 10th meeting, opened his presentation with positive news for a large audience: 2018 will be a good year; yields will be high and incomes will be higher, too. Dr. Schnitkey, professor at the University of Illinois at Urbana-Champaign’s College of Agricultural and Consumer Economics, has opened a number of the Chicago Farmers’ new seasons with presentations on trends in agriculture. These meetings always draw a large attendance and this September meeting was no exception.

While Dr. Schnitkey led off with good news about 2018, he said that 2019 probably would not fare as well due to the tariff proposals. “Next year is a year of concern because people are uncertain about what the trade dispute will do to prices,” said Dr. Schnitkey. “If you are a landowner, you will have to have tougher discussions with your renters.”

Dr. Schnitkey said that in 2018, corn fetched $4.00 a bushel and soybeans fetched $9.50 a bushel, “Prices fell after May due to the trade discussions so don’t budget these prices for 2019,” he said. “We are predicting corn could be at $3.50 per bushel and soybeans could be $9 per bushel. The trade dispute has dashed people’s hopes for higher prices. Until there is more clarity or a resolution to the trade dispute, these are the prices that we project to be in place.”

Soybeans have been at the $9.75 level since 2014, but trade discussions began in May and prices dipped. Dr. Schnitkey related that on Friday, September 7, the bushel price for soybeans in Decatur was $7.94. “We can expect a range between $7.94 and $8.20 for soybeans and just below $4 for corn throughout the harvest period. I suggest you build your expectations at these prices for next year.”

Dr. Schnitkey pointed out that there would have been price declines even without the trade issue due to high yields, but the trade talks have taken another $0.80 to $0.90 off the price of soybeans.

Additionally, corn prices are expected to fall going into 2019. Corn will look more profitable than soybeans and, as a result, farmers are switching from soybean crops to corn crops, which will depress corn prices. Dr. Schnitkey noted that western states are switching to wheat from soybeans. “The downward trend of soybeans will affect other crops. The trade dispute will have a long-term impact on prices just by being there,” he said.

In discussing yields, Dr. Schnitkey said that since 2014 soybeans and corn have produced above average amounts in Illinois. “A plateau was created, but that does not mean that those yields will always be there.”

Regarding cash rents, Dr. Schnitkey said that reports prior to the trade discussions indicated that 2018 cash rents experienced about a $5 increase. “Where it goes in 2019 is a big question,” he said. “Land values are holding relatively well and major declines are not projected. They are not making any more farmland and that is a motive to hold assets; however, we could see declines if the trade dispute continues. Landowners might want to consider using flexible or variable cash rents going forward.”

In response to an audience member’s question about lenders’ attitudes during this period, Dr. Schnitkey said that lenders have watched working capital decline on farms and it is possible they will become more proactive. He said lenders want to see a positive cash flow. “If a farmer has carry-over debt, the lender expects that farmer to sell assets to wipe out the debt.”

It’s been a long week. You’re tired, but you need groceries. Not to worry. No need to leave your abode. Order what you need online, click on delivery and the next thing you know, a bot is at your door with your weekly groceries.

The bot is not in the picture yet, but Rob Dongoski, Chicago Farmers’ May 14 speaker, said that the bot in this application is not an impossibility. He noted that the United States spends $5 billion a year on ag tech, and the use of robotics in all phases of food production and delivery is not relegated to daydreamers. He said there is a lot of conversation about the use of drones, robots and wearable sensors. Goggles that can produce fields in virtual reality are among ag tech’s newest developments. “I think you will see some application of these goggles in the next four or five years,” said Dongoski.

Dongoski, Partner and Global Agribusiness Leader at Ernst & Young LLP, said that by 2015, agriculture will have to feed 40% more people, and different kinds of food will be in demand as people in developing countries acquire more money.

Global markets are alive and well, said Dongoski, and EY is looking at megatrends. He said there are a number of mergers that are quite large, such as the Dow/DuPont $130 billion merger in 2015. “Three of the five largest acquisitions from 2011 to 2015 dealt with food and beverage companies,” Dongoski shared.

Regarding the future of agriculture, Dongoski said EY is seeing investments shift to the biotech side. Technology is seen as the way to produce more and healthier food in a more efficient manner. This technology also will help agriculture become more productive in areas of the world that do not have a robust agricultural economy. Dongoski noted that by 2100, 7 of the 10 largest cities in the world are projected to be in Africa.

While more farms are needed, Dongoski related that urbanization is leaving a void on farms. He commented, “Children are not staying on the farms; they don’t want to be in a rural environment.” He noted that because it is difficult to realize profits with small farms, the farms now are getting bigger due to consolidation. He is seeing more farm operations that range from 10,000 to 20,000 acres. Will anyone own 20,000 to 30,000 acre farms? “People who are serious about farming and see it as a profitable business will act to own these large operations,” said Dongoski. He also noted that with the move to larger acreage, the future is moving quickly to autonomous equipment.

A rapid change also is coming regarding the farmer’s source for advice. “Advice about agronomy is shifting from the local guy to data science,” said Dongoski. “The potential coming down the road is making retailers nervous.”

An audience member voiced concern about the accuracy of the data that would be available to farmers. Dongoski said there is not a mechanism currently in place that can guarantee the accuracy. “There is a lot of work to do regarding this issue,” he said. “We have to know who owns the data, what is it worth and who wants to consume the data. Security and fraud protection have to be in place.”